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                    <p>John and Susan Adams have engaged Sherry &amp; Wallace, a CPA firm, to review their year-end tax summary, so they can provide it to their local bank in an application for a loan. &nbsp;They have provided you with the following information by e-mail in addition to supporting documents (found in the Exhibits tab). &nbsp;&nbsp;You have been assigned to review their information, especially with respect to the treatment of items they paid for during the year regarding the college expenses of their children, Sam and Sara.<br>
                        &nbsp;<br>
                        Dan Sherry, a partner in the firm, has asked you to review the information provided by John and Susan to determine whether their assumptions are correct regarding their deductions, credits, and exemptions.&nbsp; He wants you to make any necessary corrections prior to inviting John and Susan to the office to discuss their tax summary.&nbsp;<br>
                        &nbsp;<br>
                        The current year personal and dependency exemption is $4,050. &nbsp;Also, in the current year, the lifetime learning credit is phased out for adjusted gross income amounts between $110,000 and $130,000 for taxpayers filing jointly, and the American opportunity tax credit is phased out for adjusted gross income amounts between $160,000 and $180,000 for married taxpayers filing jointly.<br>
                        &nbsp;<br>
                        To revise the document, click on each segment of underlined text below and select the needed correction, if any, from the list provided.&nbsp; If the underlined text is already correct in the context of the document, select [original text] from the list.</p>

                    <div>&nbsp;
                        <hr></div>
                    To: &nbsp; &nbsp; &nbsp; &nbsp; Dan Sherry and Mark Wallace, Sherry &amp; Wallace, CPAs<br>
                    From:&nbsp;&nbsp;&nbsp; John and Susan Adams<br>
                    Date:&nbsp;&nbsp;&nbsp;&nbsp; January 27, Year 1<br>
                    &nbsp;<br>
                    Dan,<br>
                    We have gathered our tax information for last year, and have provided our documents and assumptions below.&nbsp; If you need any additional information, let us know, and we will get it to you right away. &nbsp;Thank you for reviewing our tax summary, which we must provide to the bank.
                    <ul style="margin-left:40px">
                        <li>Our son, Sam, age 24, is a full-time graduate student at nearby State University (see the attached Form 1098-T) and lives at home; we pay all of his living expenses.&nbsp; Sam earned income as a tutor, shown on his W-2, which we have provided for your review.</li>
                        <li>Our daughter, Sara, age 20, is a junior attending Public College full time (see the attached Form 1098-T) and living in a dorm on campus. &nbsp;We pay all of her living expenses.</li>
                        <li>The Coverdell education savings account in Sara's name earned $125, but we did not take a distribution.&nbsp;</li>
                        <li>We purchased a new laptop this year (see the attached receipt).&nbsp; Susan uses it for business and personal purposes and shares it with Sara, who uses it in class to take notes.</li>
                    </ul>
                    We used the template your firm provided to try to estimate whether we would owe tax or receive a refund, and calculated the following.&nbsp; We were not sure about several line items in the template.&nbsp; We have marked each of these line items with the comment “see Assumption X”.&nbsp; Please review our assumptions and let us know if we need to make any corrections.&nbsp;<br>
                    &nbsp;
                    <table style="width:750px" cellspacing="0" cellpadding="0" border="0">
                        <tbody>
                            <tr>
                                <td colspan="2" style="height:20px; width:286px"><strong>John and Susan Adams</strong></td>
                                <td style="height:20px; width:87px">&nbsp;</td>
                                <td style="height:20px; width:102px">&nbsp;</td>
                                <td style="height:20px; width:140px">&nbsp;</td>
                            </tr>
                            <tr>
                                <td colspan="2" style="height:20px; width:286px"><strong>Tax Return Summary </strong></td>
                                <td style="height:20px; width:87px">&nbsp;</td>
                                <td style="height:20px; width:102px">&nbsp;</td>
                                <td style="height:20px; width:140px">&nbsp;</td>
                            </tr>
                            <tr>
                                <td style="height:20px; width:106px">&nbsp;</td>
                                <td style="height:20px; width:180px">&nbsp;</td>
                                <td style="height:20px; width:87px">&nbsp;</td>
                                <td style="height:20px; width:102px">&nbsp;</td>
                                <td style="height:20px; width:140px">&nbsp;</td>
                            </tr>
                            <tr>
                                <td style="height:20px; width:106px"><strong>Wages</strong></td>
                                <td style="height:20px; width:180px">&nbsp;</td>
                                <td style="height:20px; width:87px">&nbsp;</td>
                                <td style="height:20px; width:102px">&nbsp;</td>
                                <td style="height:20px; text-align:right; width:140px">122,360</td>
                            </tr>
                            <tr>
                                <td colspan="2" style="height:20px; width:286px"><strong>Schedule B: interest </strong>(see Assumption 1)</td>
                                <td style="height:20px; width:87px">&nbsp;</td>
                                <td style="height:20px; width:102px">&nbsp;</td>
                                <td style="height:20px; text-align:right; width:140px"><u>125</u></td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px"><strong>Gross income</strong></td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:140px">122,485</td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px">&nbsp;</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px"><strong>Deductions for AGI</strong></td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td colspan="2" style="height:20px; width:268px">Tuition and fees (see Assumption 2)</td>
                            <td style="height:20px; text-align:right; width:102px">4,000</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px"><strong>Total adjustments</strong></td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:140px"><u>4,000</u></td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px">&nbsp;</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px"><strong>Adjusted gross income</strong></td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:140px">118,485</td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px">&nbsp;</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px"><strong>Itemized deductions</strong></td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td style="height:20px; width:180px">Medical</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:102px">7,800</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td style="height:20px; width:180px">Less 10% of AGI</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:102px">11,849</td>
                            <td style="height:20px; text-align:right; width:140px">0</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td style="height:20px; width:180px">Home mortgage interest</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:140px">11,275</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td style="height:20px; width:180px">Taxes</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:140px">7,250</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td style="height:20px; width:180px">Cash contributions</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:140px">3,500</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td colspan="2" style="height:20px; width:268px">Employee business expense</td>
                            <td style="height:20px; text-align:right; width:102px">1,523</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td style="height:20px; width:180px">Less 2% of AGI</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:102px">(2,370)</td>
                            <td style="height:20px; text-align:right; width:140px"><u>0</u></td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td style="height:20px; width:180px">Total itemized<br>
                                Deductions</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:140px">22,025</td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:47px; width:286px">&nbsp;<br>
                                &nbsp;<br>
                                Exemptions: (see Assumption 3)</td>
                            <td style="height:47px; width:87px">&nbsp;</td>
                            <td style="height:47px; width:102px">&nbsp;</td>
                            <td style="height:47px; text-align:right; width:140px">16,200</td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px">&nbsp;<br>
                                <strong>Taxable income</strong></td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:140px">80,260</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td style="height:20px; width:180px">&nbsp;</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px"><strong>Tax </strong></td>
                            <td style="height:20px; width:180px">&nbsp;<br>
                                Regular (based on tax tables)</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:140px">11,608</td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px">&nbsp;</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td style="height:20px; width:180px">Withholding</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; width:140px">&nbsp; &nbsp; &nbsp; 7,000</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px"><strong>Credits</strong></td>
                            <td style="height:20px; width:180px">&nbsp;</td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; width:140px">&nbsp;</td>
                        </tr>
                        <tr>
                            <td style="height:20px; width:106px">&nbsp;</td>
                            <td colspan="3" style="height:20px; width:369px">American opportunity tax credit (see Assumption 4)</td>
                            <td style="height:20px; width:140px">&nbsp; &nbsp; &nbsp; 2,500</td>
                        </tr>
                        <tr>
                            <td style="height:23px; width:106px">&nbsp;</td>
                            <td colspan="2" style="height:23px; width:268px">Lifetime learning credit (see Assumption 5)</td>
                            <td style="height:23px; width:102px">&nbsp;</td>
                            <td style="height:23px; width:140px">&nbsp; &nbsp; &nbsp; 2,000</td>
                        </tr>
                        <tr>
                            <td colspan="2" style="height:20px; width:286px"><strong>Amount due (refund)</strong></td>
                            <td style="height:20px; width:87px">&nbsp;</td>
                            <td style="height:20px; width:102px">&nbsp;</td>
                            <td style="height:20px; text-align:right; width:140px"><span class="doubleUnderline"><u>108</u></span></td>
                        </tr>
                        </tbody>
                    </table>
                    &nbsp;

                    <hr>
                    <p>COMMENTS:<br>
                        &nbsp;<br></p>
                    Assumption 1:&nbsp;
                    <span class="parent mbg far {if condition='isset($log.1)'}xbg{/if}">{if condition='isset($log.1) && $log.1.topic_v eq 2'}<s>{/if}We should report the $125 in Coverdell education savings account earnings as taxable interest income.{if condition='isset($log.1) && $log.1.topic_v eq 2'}</s>{/if}</span>
                    <form class="layui-form" id='form' action="{:url('index/form')}" method="post" style="display:none;">
                        <blockquote class="layui-elem-quote layui-quote-nm">
                            <b class="b">Choose an option below:</b><hr>
                            <div class="layui-form-item">
                                <div class="layui-input-block">
                                    
                                    <input type="radio" name="topic_t[1]" value="1" {if condition='isset($log.1) && $log.1.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'>We should report the $125 in Coverdell education savings account earnings as taxable interest income.</em>" ><br/>
                                    <input type="radio" name="topic_t[1]" value="2" {if condition='isset($log.1) && $log.1.topic_v eq 2'}checked{/if} title="<em class='span'>We should report the $125 in Coverdell education savings account earnings as a reduction to the American opportunity tax credit.</em>"><br/>
                                    <input type="radio" name="topic_t[1]" value="3" {if condition='isset($log.1) && $log.1.topic_v eq 3'}checked{/if} title="<em class='span'>We should not report the $125 in Coverdell education savings account earnings as income because we cannot claim Sara as a dependent.</em>" ><br/>
                                    <input type="radio" name="topic_t[1]" value="4" {if condition='isset($log.1) && $log.1.topic_v eq 4'}checked{/if} title="<em class='span'>We should not report the $125 in Coverdell education savings account earnings as taxable interest income because Coverdell earnings accumulate tax-free.</em>"><br/>
                                </div>
                            </div>
                            <div class="layui-btn-group">
                                <a class="layui-btn layui-btn-disabled res">Reset</a>
                                <a class="layui-btn cancel layui-btn-warm" >Cancel</a>
                                <button class="layui-btn layui-btn-normal {if condition='!isset($log.1)'}layui-btn-disabled{/if} submit">Accept</button>
                            </div>
                        </blockquote>
                    </form>
                    &nbsp;<br>
                    Assumption 2: 
                    <span class="parent mbg far {if condition='isset($log.2)'}xbg{/if}">We should deduct $4,200 because Sara uses the new laptop in class.</span>
                    <form class="layui-form" id='form' action="{:url('index/form')}" method="post" style="display:none;">
                        <blockquote class="layui-elem-quote layui-quote-nm">
                            <b class="b">Choose an option below:</b><hr>
                            <div class="layui-form-item">
                                <div class="layui-input-block">
                                    
                                    <input type="radio" name="topic_t[2]" value="1" {if condition='isset($log.2) && $log.2.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'>We should deduct $4,200 because Sara uses the new laptop in class.</em>" ><br/>
                                    <input type="radio" name="topic_t[2]" value="2" {if condition='isset($log.2) && $log.2.topic_v eq 2'}checked{/if} title="<em class='span'>We have no tuition and fees deduction.</em>"><br/>
                                    <input type="radio" name="topic_t[2]" value="3" {if condition='isset($log.2) && $log.2.topic_v eq 3'}checked{/if} title="<em class='span'>We should deduct $32,000 because this is the total tuition paid by us during the year.</em>" ><br/>
                                    <input type="radio" name="topic_t[2]" value="4" {if condition='isset($log.2) && $log.2.topic_v eq 4'}checked{/if} title="<em class='span'>We should deduct $27,500 because this is the tuition paid by us during the year offset by our education tax credits.</em>"><br/>
                                </div>
                            </div>
                            <div class="layui-btn-group">
                                <a class="layui-btn layui-btn-disabled res">Reset</a>
                                <a class="layui-btn cancel layui-btn-warm" >Cancel</a>
                                <button class="layui-btn layui-btn-normal {if condition='!isset($log.2)'}layui-btn-disabled{/if} submit">Accept</button>
                            </div>
                        </blockquote>
                    </form><br>
                    <br>
                    Assumption 3: 
                    <span class="parent mbg far {if condition='isset($log.3)'}xbg{/if}">We can claim a total of four personal and dependency exemptions at $4,050 each, or $16,200.</span>
                    <form class="layui-form" id='form' action="{:url('index/form')}" method="post" style="display:none;">
                        <blockquote class="layui-elem-quote layui-quote-nm">
                            <b class="b">Choose an option below:</b><hr>
                            <div class="layui-form-item">
                                <div class="layui-input-block">
                                    
                                    <input type="radio" name="topic_t[3]" value="1" {if condition='isset($log.3) && $log.3.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'>We can claim a total of four personal and dependency exemptions at $4,050 each, or $16,200.</em>" ><br/>
                                    <input type="radio" name="topic_t[3]" value="2" {if condition='isset($log.3) && $log.3.topic_v eq 2'}checked{/if} title="<em class='span'>We can claim a total of two personal exemptions at $4,050 each, or $8,100.</em>"><br/>
                                    <input type="radio" name="topic_t[3]" value="3" {if condition='isset($log.3) && $log.3.topic_v eq 3'}checked{/if} title="<em class='span'>We can each claim a personal exemption plus a dependency exemption for Sam for a total of three at $4,050 each, or $12,150.</em>" ><br/>
                                    <input type="radio" name="topic_t[3]" value="4" {if condition='isset($log.3) && $log.3.topic_v eq 4'}checked{/if} title="<em class='span'>We can each claim a personal exemption plus a dependency exemption for Sara for a total of three at $4,050 each, or $12,150.</em>"><br/>
                                </div>
                            </div>
                            <div class="layui-btn-group">
                                <a class="layui-btn layui-btn-disabled res">Reset</a>
                                <a class="layui-btn cancel layui-btn-warm" >Cancel</a>
                                <button class="layui-btn layui-btn-normal {if condition='!isset($log.3)'}layui-btn-disabled{/if} submit">Accept</button>
                            </div>
                        </blockquote>
                    </form><br>
                    &nbsp;<br>
                    Assumption 4: 
                    <span class="parent mbg far {if condition='isset($log.4)'}xbg{/if}">We can claim the full American opportunity tax credit of $2,500.</span>
                    <form class="layui-form" id='form' action="{:url('index/form')}" method="post" style="display:none;">
                        <blockquote class="layui-elem-quote layui-quote-nm">
                            <b class="b">Choose an option below:</b><hr>
                            <div class="layui-form-item">
                                <div class="layui-input-block">
                                    
                                    <input type="radio" name="topic_t[4]" value="1" {if condition='isset($log.4) && $log.4.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'> We can claim the full American opportunity tax credit of $2,500.</em>" ><br/>
                                    <input type="radio" name="topic_t[4]" value="2" {if condition='isset($log.4) && $log.4.topic_v eq 2'}checked{/if} title="<em class='span'>We cannot claim an American opportunity tax credit for either Sam's or Sara's expenses.</em>"><br/>
                                    <input type="radio" name="topic_t[4]" value="3" {if condition='isset($log.4) && $log.4.topic_v eq 3'}checked{/if} title="<em class='span'>We can claim a full $5,000 American opportunity tax credit for both children's costs.</em>" ><br/>
                                    <input type="radio" name="topic_t[4]" value="4" {if condition='isset($log.4) && $log.4.topic_v eq 4'}checked{/if} title="<em class='span'>The amount that we can claim for the American opportunity tax credit must be reduced based on our adjusted gross income for the year.</em>"><br/>
                                </div>
                            </div>
                            <div class="layui-btn-group">
                                <a class="layui-btn layui-btn-disabled res">Reset</a>
                                <a class="layui-btn cancel layui-btn-warm" >Cancel</a>
                                <button class="layui-btn layui-btn-normal {if condition='!isset($log.4)'}layui-btn-disabled{/if} submit">Accept</button>
                            </div>
                        </blockquote>
                    </form><br>
                    &nbsp;<br>
                    Assumption 5: 
                    <span class="parent mbg far {if condition='isset($log.5)'}xbg{/if}">We can claim the full lifetime learning credit of $2,000.</span>
                    <form class="layui-form" id='form' action="{:url('index/form')}" method="post" style="display:none;">
                        <blockquote class="layui-elem-quote layui-quote-nm">
                            <b class="b">Choose an option below:</b><hr>
                            <div class="layui-form-item">
                                <div class="layui-input-block">
                                    
                                    <input type="radio" name="topic_t[5]" value="1" {if condition='isset($log.5) && $log.5.topic_v eq 1'}checked{/if} title="<em>[Original text]</em> <em class='span'>We can claim the full lifetime learning credit of $2,000.</em>" ><br/>
                                    <input type="radio" name="topic_t[5]" value="2" {if condition='isset($log.5) && $log.5.topic_v eq 2'}checked{/if} title="<em class='span'>We cannot claim a lifetime learning credit for either Sam's or Sara's expenses.</em>"><br/>
                                    <input type="radio" name="topic_t[5]" value="3" {if condition='isset($log.5) && $log.5.topic_v eq 3'}checked{/if} title="<em class='span'>We can claim a $4,000 lifetime learning credit because we have two students in college.</em>" ><br/>
                                    <input type="radio" name="topic_t[5]" value="4" {if condition='isset($log.5) && $log.5.topic_v eq 4'}checked{/if} title="<em class='span'>The lifetime learning credit that we can take must be reduced based on our adjusted gross income for the year.</em>"><br/>
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                <div><strong>Pop-up 1:&nbsp; Coverdell Education Savings Account</strong><br>
                    <span style="color:#0000ff">We should not report the $125 in Coverdell education savings account earnings as taxable interest income because Coverdell earnings accumulate tax-free.</span><br>
                    <br>
                    Earnings on a Coverdell education savings account are not taxable. &nbsp;Additionally, if the income represented a type of income that is taxable, it would not be reported on the tax return for John and Susan Adams because it is reported under the Social Security number of Sara.<br>
                    <br>
                    <br>
                    <strong>Pop-up 2:&nbsp; Tuition and Fees Deduction</strong><br>
                    <span style="color:#0000ff">We have no tuition and fees deduction.</span><br>
                    <br>
                    An amount can only be deducted as a qualified education expense if it represents tuition and certain related expenses required for enrollment or attendance at an eligible educational institution.&nbsp; Furthermore, a deduction for qualified education expenses cannot be taken if the American opportunity or lifetime learning credit has been claimed for that same student in the same year.<br>
                    <br>
                    <br>
                    <strong>Pop-up 3:&nbsp; Personal and Dependency Exemptions</strong><br>
                    <span style="color:#0000ff">We can claim a total of four personal and dependency exemptions at $4,050 each, or $16,200.</span><br>
                    <br>
                    John and Susan may each claim a personal exemption and a dependency exemption for both Sam and Sara for a total of $16,200 ($4,050 each).&nbsp; Because Sam is age 24, he is not a qualifying child.&nbsp; However, he satisfies all of the tests for a qualifying relative, so the Adamses can claim him as a dependent.&nbsp; Sara appears to meet the requirements of a qualifying child.<br>
                    <br>
                    <br>
                    <strong>Pop-up 4:&nbsp; American Opportunity Tax Credit</strong><br>
                    <span style="color:#0000ff">We can claim the full American opportunity tax credit of $2,500.</span><br>
                    <br>
                    Sam is a graduate student and, as such, qualifies for the lifetime learning credit, but not the American opportunity tax credit.&nbsp; Sara, however, as an undergraduate and a junior does qualify (presumably) and her maximum credit is $2,500 (100 percent of the first $2,000 of qualifying expenses plus 25 percent of the next $2,000) after reducing the expenses for the scholarship and the Coverdell distribution.&nbsp; Higher AGI limits apply in the case of the AOTC, so her credit is not phased out.<br>
                    <br>
                    &nbsp;<br>
                    <strong>Pop-up 5:&nbsp; Lifetime Learning Credit</strong><br>
                    <span style="color:#0000ff">The lifetime learning credit that we can take must be reduced based on our adjusted gross income for the year.</span><br>
                    <br>
                    The lifetime learning credit is equal to 20 percent of qualifying expenses (per taxpayer) for qualifying students, including graduate students, such as Sam.&nbsp; Unlike the more generous American opportunity tax credit, this is a limit per taxpayer and cannot be used for a student for whom the AOTC is also claimed. &nbsp;Because Sam is not eligible for the AOTC, his parents' credit is limited based on their AGI, which exceeds the base limit provided of $110,000, and their credit will be limited.
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